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Absence of SA land reform law will continue to fuel uncertainty - Moody's

Policy uncertainty will linger in South Africa until land reform laws are formulated and this won’t happen until after next year’s election, dampening investor sentiment and creating a credit-negative environment, Moody’s Investors Service said.

The ruling ANC plans to change the Constitution to make it easier to expropriate land without paying for it, a move that’s added to wider emerging-market jitters in knocking the country’s assets. The party has pledged to tackle land reform responsibly, while critics of the plan have raised concerns that the move could lead to an erosion of property rights and ultimately, Zimbabwe-style farm seizures.

“What would be key is when the law is published and debated, because that’s when we’ll get the detail,” Lucie Villa, Moody’s vice president, told reporters in Johannesburg on Thursday.

“We don’t see it approved before the next election.”

The lack of proposed laws creates uncertainty that “could be credit-negative because of adverse investor sentiment,” she said.

With general elections looming next year, President Cyril Ramaphosa has embraced land expropriation without compensation as a means of addressing racially skewed ownership patterns rooted in colonial and white-minority rule, but insists there won’t be a land grab.

Government data show more than two-thirds of farmland is owned by whites, who constitute 7.8% of the country’s 57.7 million people.

“The way we look at this policy topic is the following: there has been a clear objective stated by the government on what they want to achieve with this reform which is the distribution of land without hurting the economy,” Villa said.

“If we assume that the reform will achieve the objectives, you will add a positive to the economy. The question is, ‘How can the authorities ensure they meet those objectives?’ Until the law is proposed, there is some policy uncertainty.”